If you’re an industrial tenant coming out of a long term lease wanting to know your relocation/expansion options, there is probably a bit of a shock when you check to see what’s out there and the price tag that comes with it. Not only has inventory dried up, but rental rates have risen drastically, by 30-40% in the last few years. What should you be expecting?
St. Catharines still with the highest demand now has industrial inventory leasing at least $8 per sq. ft. for a quality building. Other municipalities in the region have also had significant increases, so it’s not as if you can avoid new market rental rates. Some industrial buildings have achieved $10 per sq. ft. or higher if they are perceived to have premium location and features.
If you’re wondering if there will be an end in sight to these industrial market conditions, we aren’t seeing it at this time. In order for there to be relief in rental rates either something catastrophic needs to happen to the market that causes a lot of businesses to fold, or a significant amount of new inventory needs to be added. While there is turmoil in global markets due to the threat of trade wars we currently aren’t seeing activity that would be alarming to Niagara’s industrial real estate market. As for adding inventory it’s just not happening due to the current cost of construction. As costs for building continue to increase, it makes it more difficult to justify as the return on investment isn’t high enough to support it.
My advice to tenant’s concerned about these market conditions is to start looking at your relocation options early, with a local industrial real estate broker, and be prepared to act quickly.